LONDON (Alliance News) - UK stocks are set to open higher Wednesday, following gains made in the US and Asia and ahead of the release of the minutes from the October meeting of the Monetary Policy Committee of the Bank of England.
Futures indicate the FTSE 100 will open 20 points higher at 6,392.
The UK's leading index, along with other major European indices, made significant gains on Tuesday amid reports that the European Central Bank is looking to take further steps to boost the slowing eurozone economy. Reuters reported that the ECB is considering buying bonds in the secondary market as part of its effort to boost lending in the single currency block. The central bank could take a decision as soon as December, Reuters said.
"The fact that story pushed equities up should be further evidence that it is central banks, not fundamentals, driving market momentum at the moment," says Rabobank analyst Michael Every.
Equity markets have seen a significant increase in volatility recently as investors show their nervousness over whether the global economy is strong enough to stand on its own two feet, without the extra support of the US quantitative easing programme that ends this month.
Hope of further stimulus was enough to help US investors look past mixed earnings and push Wall Street higher. The DJIA gained 1.3% higher, the S&P 500 2.0%, and the Nasdaq Composite 2.4%.
US Technology bellwether Yahoo Inc beat estimates on Tuesday by reporting third quarter earnings per share of USD0.52, much better than the USD0.30 that had been forecast by analysts. The profit includes a 6.3-billion-dollar gain from Yahoo's sale of a stake in the Alibaba Group, as part of the Chinese company's initial public offering in September.
Not all US earnings were so positive however, with McDonald's Corp, for example, reporting earnings per share of USD1.09 in the third quarter, down from USD1.52 last year and missing expectations for USD1.37.
It has been a positive Asian session so far Wednesday, with the Nikkei closing up about 2.5%, while the Hang Seng continues up 1.4%, and the Shanghai Composite is fractionally higher.
The domestic economic focus in the UK Wednesday is the release of the minutes from the latest MPC meeting at the Bank of England. The committee elected to keep the UK base rate on hold at a record low of 0.5% at the meeting earlier this month, but given that two of its members voted for a rate rise in September, investors will be keen to see how the vote was split this month. Given the recent market volatility, calls for rate rises have been somewhat subdued and the consensus expectation is for an unchanged 7-2 vote to keep rates on hold.
One of BoE's most notable hawks, Martin Weale, will be speaking after the market close at 2000 BST in Cambridge. Weale and Ian McCafferty were the two Monetary Policy Committee members to vote for a rate rise last month.
From the UK corporate calendar Wednesday, British American Tobacco has joined the list of names highlighting the impact of the strength of the pound on its earnings. The cigarette maker said its nine-month revenue was up 2.4% at constant exchange rates but down 9.6% at actual rates.
Updates are also out Wednesday from Playtech, International Personal Finance, and Spirit Pub Co. GlaxoSmithKline is reporting third-quarter earnings at 1200 BST.
In the afternoon, the attention will shift to the US where third quarter earnings season continues with a multitude of names including AT&T Inc and Boeing Company reporting.
US consumer price inflation at 1330 BST will be of key interest given the heightened concerns over the strength of the economy as stimulus is withdrawn. The expectation is for a slight fall in CPI to 1.6% year-on-year in September, from 1.7% in August. The US, like the UK, targets 2.0% inflation, and anything greater than the expected 0.1% fall will likely cause some concern, analysts say.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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British American Tobacco (BATS)
Glaxosmithkline (GSK)
Inter. Pers. (IPF)
Playtech (PTEC)